In the 4th Vienna Music Business Research Days the “Future of Music Licensing” was highlighted. The conference, therefore, focused on collective rights management and collecting societies respectively as well as the registration of music rights. However, in a broader perspective also the future of copyright in a digital society was discussed.

In the opening panel of the conference on Thursday the concept of creative commons licensing and the set-up of a collection society for CC-licensing by the C3S initiative in Germany was controversially discussed.

The first conference day, however, was devoted the 3rd Young Scholars’ Workshop. Fourteen young academics from 8 different countries – Australia, Austria, China, Czech Republic, France, Germany, Palestine and Portugal – presented their papers on a wide range of music business research topics.

For a detailed coverage of the whole conference– including all papers and presentation slides as well as audio files of all talks and discussion – please click here.

Panel discussion: “How Creative Is Creative Commons Licensing”

Till Evert, CEO of ARESA a subsidiary company of BMG Rights Management, and Meik Michalke, proponent of the C3S initiative to establish a collecting society for creative commons licenses The discussion was chaired by Sonja Bettel from Ö1 – Austrian Broadcasting Service.

At the beginning of the discussion, Meik Michalke pointed out that it is incompatible to publish under creative commons licenses and being a member of a collecting society (especially of the German GEMA) at the same time. Therefore, he and a handful of other proponents decided to establish the C3S (Cultural Creative Commons Society) initiative. Hence, C3S aims at monetising CC-licensed works. This leads Sonja Bettel to ask Till Evert why collecting societies do not want to license CC-works? ARESA’s CEO defended the collecting societies’ position to avoid CC-licensing by pointing at the necessity of exclusive licensing agreements with its member and by a lack of interest of the copyright holders. Nevertheless Meik Michalke was convinced that there is a market for CC-licensed works and sees an obstacle in artists not know enough about it. CC is about freedom to choose the range of protection and therefore could be very attractive for creative. For Till Evert this case by case licensing is exactly the main problem. It is too expensive for traditional collecting societies and less revenue would return to the authors because of higher administrative costs. Meik Michalke countered that a case to case is just a technical problem to be solved. He expects that the C3S will be operative in 2-3 years, when all technical problems would be solved and all bureaucratic obstacles would be overcome. It should be considered, so Michalke that all 8 proponents of the C3S work in their spare time and had no administrative support.

In the discussion with the floor Till Evert emphasized that collecting societies should not be underestimated. There is a mind change especially within the younger generation of members. If they want a more flexible way to license their music this could be made possible. By now it is possible to withdraw certain rights (e.g. digital rights), but it is not possible to withdraw certain works and won’t be in the near future.

Thus, Meik Michalke and Till Evert departed by agreeing to disagree in the future potential of creative commons licensing leaving the audience with a lot of question marks.

The Future of Music Licensing, June 21, 2013

Dennis Collopy of the University of Hertfortshire/UK highlighted in his talk the economic logics of collective rights management in the digital era from a rights holders’ perspective. The title of his paper presented – “Disintermediation in Music Licensing: The Right Holders Dilemma” – points at the change of power from an oligopoly of right holders to an oligopsony of rights users in the digital era. He starts his presentation with an overview over the international market of collective licensing. According to IFPI data, Europe is by far the most important collective licensing market with a share of nearly 60 percent followed by North America with 22 percent, Asia Pacific with 16 percent and South and Central America with 2.4 percent. Nevertheless the European collective licensing market is by far the most fragmented one. The performing rights deductions for administration and social & cultural purposes differ throughout the countries in the European Union. Whereas Denmark has the lowest administration rate with 11 percent, Belgium reaches nearly 25 percent. In the same range also the cultural deduction differs from zero in the UK and Ireland to more than 11 percent in Spain. It is striking for Dennis Collopy that collecting societies doing basically the same job differ so much in respect to their administration costs. Also the reporting and accounting standards are very different. In some countries collecting societies account quarterly, but in others semi-annually. The payments are made not always immediately but can delay from 2 to 5 years from the time the money is paid by the music user to the time the songwriter is paid.

Dennis Collopy also highlights that in the best case scenario a songwriter receives 64 percent of the amount paid by the music user, if a local sub-publisher is involved, which receives 88 percent from the collection society and hands over 85 percent of these 88 percent to the songwriter. In other cases the songwriters get just 40 percent of the users’ payments and in the worst case scenario this share declines even to 17.5 percent.

Nevertheless Dennis Collopy supports the concept of collective rights management. There are indeed flaws in the system and there is an urgent need for change, but the system itself is a good and important thing.

Dennis Collopy’s contribution directly leads to the “Proposal of the EU-Commission for a Directive on Collecting Societies” presented by Liane Wildpanner, officer in the DG Internal Market and Services, Directorate D for Intellectual Property of the EU-Commission. In her initial statement Liane Wildpanner stated that the EU proposal on collecting societies is neither to reduce the number of collecting societies in Europe nor to abolish monopolies. It is about to achieve a fully functioning Digital Single Market. Therefore the EU Commission screened the European landscape of collecting societies and identified the following problems:

difficulties in joining foreign collecting societies

obligations to entrust all rights, for all territories, etc.

discrimination of foreign members

limited membership rights of publishers

limited access to annual reports

limited information on cross-border royalty flows

late distribution of royalties

risky investments

unclear rules on the use of non-distributed income

The EU Commission, thus, raised concerns about the management and handling of revenues in some collecting societies, which results in less revenue to rights holders, less incentives to create and less innovation for consumers. Hence, the main provisions of the EU proposal are

Membership in collecting societies

Participation of right holders in the decision-making process

Handling of funds

Relations with other collecting societies and users

Transparency and financial reporting

In the following Mrs. Wildpanner focus on a handful of key paragraphs in the proposal. In article 5 the rights of right holder are defined and they should have the right to withdraw their rights. In article 12 the accurate and timely distribution of royalties is demanded – 12 months from the end of the financial year in which the rights revenue was collected – and rules on non-distributable income are set up. Mrs. Wildpanner also highlighted the complexity of the current licensing of music rights for online uses. An online music service provider currently has to clear the rights in all 28 single EU member states, which costs a lot of money and time. Therefore, the EU commission aims at an easier way for multi-territorial licensing. Collecting societies should be enabled to grant multi-territorial licences to music users. If, however, a collecting society is not willing to grant multi-territorial licences, the right holders should have the right to may choose to mandate another collecting society or another license entity individually for multi-territorial licensing as pointed out in article 30.

Other provisions of the EU Commission regarding multi-territorial licensing are:

Application of certain provisions to entities owned in whole or in part by a collecting society

Flexibility of licensing terms required to encourage the granting of licences to innovative online services

Derogation for online music rights required for radio and TV programmes (simulcasting, catch-up TV)

Necessity for member states to ensure that compliance with the requirements of Title III can be effectively reviewed by competent authorities (complaints, sanctions and measures)

At the end of her talk Mrs. Wildpanner stresses that the proposal is not made in favour of large collecting societies (GEMA, PRS, SACEM …), but to protect the repertoires of smaller collecting societies by the necessity of multi-territorial licensing agreements.

Adolf Dietz, the former head of the Max Planck Institute for Intellectual Property and Competition Law in Munich doubted in his speech that the EU Commission’s proposal would contribute to a higher degree of cultural diversity within the European Union. At the beginning of his talk on “The Proposal of the EU Commission for a Directive on Collecting Societies and Cultural Diversity – a Missed Opportunity?”, Mr. Dietz highlights the importance of cultural diversity in main EU documents – Copyright Directive, Charter of the Fundamental Rights of the EU – and in the UNESCO convention of cultural diversity.

From this perspective, Mr. Dietz observed an “(…) apparent lack of interest of the competent services of the EU Commission concerning the cultural role and functions of copyright law in general and of collecting societies in particular.” It rather “(…) contrasts in a rather shocking way with the relevant position of the European Parliament which in no less than three Resolutions has admonished the Commission (…) to respect more concretely the cultural diversity and the cultural and social functions of collecting societies and not to over-accentuate the application of antitrust law to them.” The collecting societies should be assisted by the EU Commission to fulfil their tasks and should not be weakened in the name of competition law. Mr. Dietz then stresses the importance of national collecting societies, which “(…) have a primordial responsibility for the creative people of ‘their’ country or of ‘their’ linguistic culture.” In this respect, he defended the system of cultural deductions in nearly all EU member states and criticized the reluctant attitude of the EU Commission towards cultural deductions. In general, Mr. Dietz observed a great imbalance that “(…) all strict obligations are imposed on the collecting societies whilst the obligations of the right holders and especially of the users are regulated only in a very superficial way.” He, thus came to the conclusion: “It is high time for the Commission to reflect again and to be aware that its position has become untenable, in particular also because, in a politically and democratically intolerable manner, it acts in total neglect of the will of the European Parliament. Consequently, we hope that that proposal will never be accepted in its actual version by the legislators, the Council of the European Union and the European Parliament. From the point of view of the protection of cultural diversity it represents a big missed opportunity.”

After lunch break the importance of music rights’ registration in the digital age was addressed by music industry veteran Jim Griffin (Geffen Records, Warner Music Group and currently OneHouse LLC) in his tall about “Unumerated Rights, Unrespected Rights”. He points at the importance of music registries to enforce the rights of the creative and their intermediaries (mainly labels and music publishers). However, music registries were not really welcomed in the past. The Berne Convention of 1886 already discouraged registration of music rights, which resulted in highly fragmented licensing market with a high share of unumerated rights resulting in unrespected rights. Therefore new copyright regulation should encourage the registration of rights, otherwise the rights will be unlicensed and unpaid. Thus, the main aim of rights’ registration is profit – for the registrars as well as for the registrants. The correct registration of rights is the unavoidable precondition to be paid for creating and disseminating music. However, the attribution of works to right holders is also a moral right and history needs a cultural record. Music registration is, however, not just a national but a global effort. Sovereign registries must be synchronized globally and compatible. Unique identifiers such as the International Standard Recording Code (ISRC), the International Standard Work Code (ISWC) and the International Standard Name Identifier (ISNI) still exist, but have to be used in such a global registration network. The music registries therefore can learn from the Internet, e.g. from the Domain Naming System (DNS), which is public, non-profit oriented but very profitable. At the end all claims have to be registered to ensure the widest possible range of protection. Jim Griffin concluded:

Registering, enumerating claims can be profitable, is a moral right, essential for cultural record.

P. Bernt Hugenholtz of Institute for Information Law at the University of Amsterdam then broadens the perspective by advocating for “A Digital Copyright for a Digital Society”. Mr. Hugenholtz observed a gap between legal norms and social norms regarding file sharing. But this should not result in more restrictive but a more flexible copyright law. If there is a high degree of illegal activities than you can either battle against it at high costs or to legalize them as the Netherlands did with soft drugs. Since the current copyright framework only benefits the industry, but not the authors and other creative, there is an urgent need for copyright reform. A modernized copyright law could create new jobs and stimulate growth in the European Union.

An agenda for an EU Copyright Reform, therefore, should

make limitations and exceptions more harmonized and flexible

reduce terms of protection from 70 to 50 years (authors’ rights as well as neighbouring rights)

simplify online licensing across the EU

recalibrate reproduction right

simplify legal protection of digital rights management (DRM)

downsize the database right

rebalance copyright enforcement remedies

And the long term objective should be the unification of EU Copyright Law – instead of national laws – to enable a single European market for copyrighted works.

At the beginning of the vivid and engaged panel discussion Peter Jenner picked up a question from the floor, how to stop piracy in Bulgaria, which is estimated at a rate of 80 percent. Till Evert suggested a mix of copyright enforcement and educational efforts to bring piracy down in the poorest country of the European Union. Jim Griffin preferred the term copyrisk instead of copyright. The copyright holders should not be surprised that their rights would be infringed in poor countries with a very low monthly disposable income per head. Therefore, they into the risk to have their works disseminated for free. Werner Müller countered that it should be not accepted that dubious Internet platforms earn a lot of money by advertising income on the back of the creative, who get nothing. Therefore, the only solution in fighting copyright infringement is the enforcement of copyright law with the Internet service providers (ISPs). Eva Lichtenberger pointed at the complexity of copyright legislation. Not only the interests of right holders should be taken into consideration but also the interests of the rights’ users, the consumers and the general public. P. Bernt Hugenholtz argued that the most promising strategy to dam up piracy is to establish attractive alternatives for legal music consumption. In addition it should be questioned if any private use of coyrighted works should be considered as infringement. There are alternative ways to compensate right holders on the one hand and to decriminalize consumers. The so called content or cultural flat rate as suggested by German Green Party could be such a promising strategy.

The discussion then touched other topics apart from piracy: the loss of control in digital content markets, anti-trust laws and the future of the collecting societies, the need for a global music rights registry and a new coalition of authors and collecting societies to increase their bargaining power against potent rights’ users such as Google, Amazon and Apple. After the discussion with the audience, Peter Jenner concluded that all questions remained unanswered and the need for a new copyright law in a digital society is more urgent than ever before.

Click here for the audio files of the panel discussion (part 1 and part 2).

Young Scholars’ Best Paper Award 2013

The conference was closed by awarding the best paper of the young scholars’ workshop that took place on June 20 at the University of Music and Performing Arts Vienna. The workshop’s program and almost all papers could be downloaded from the workshop’s homepage. This time two papers were awarded by an international jury of music business researchers: “Consumer Information in the Digital Age: Empirical Evidence from the Spillovers in the Music Industry” by Sisley Maillard of University Telecom ParisTech (France) and “Disintermediation Effects in the Music Business – A Return to Old Times” by Francisco Bernardo and Luis Gustavo Martins of the Catholic University of Portugal in Porto. Both papers will be published in the April 2014 issue of the International Journal of Music Business Research.